Tom Bill

Don’t blame Brexit: the vote to leave the EU has had little effect on the housing market

As a former property journalist I understand why the media uses Brexit to explain the performance of the UK housing market. Or even, at a stretch, Donald Trump.

House prices are a national obsession, but a Brexit headline gives the story an extra dimension.

Coverage of all three subjects is likely to intensify in 2017, as this morning’s Article 50 verdict reminded us, so it seems like an appropriate moment to examine how close the links are between house prices, the UK’s decision to leave the European Union and the new US President.

First, let’s look at prime central London (PCL), where you would expect the biggest impact to be felt.

Knight Frank’s PCL index recorded a -6.3 per cent decline in 2016 and you will have seen the headlines about falling prices in London’s most expensive postcodes. Don’t stop reading here: the rather mundane cause is stamp duty not the EU referendum.

Two hikes since December 2014 have slowed transaction levels, which have started to stabilise as vendors reduce asking prices. Knight Frank transactions in the last quarter of 2016 were higher than the same period in 2015 and 2014.

Two other factors are behind the slowdown, neither of which involves the 45th President of the United States. First, the market has paused for breath to some extent following an exceptional period of growth between 2009 and 2012. Second, ultra-low interest rates mean more homeowners are able to sit tight, reducing the turnover of properties.

Admittedly, some buyers and sellers will hold off for Article 50, but this should be put in context. For every person waiting, there will be somebody impatient to move after the stamp duty-induced slowdown.

Similarly, while transaction volumes were relatively weak last summer, the EU referendum was only part of the story.

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